Clean Harbors (CLH) Stifel 2024 Cross Sector Insight Conference summary

Asset base and business model

• Operates a vast network of incinerators, TSDFs, landfills, wastewater plants, and over 700 branches across North America, creating a strong asset moat.

• Manages over 70% of commercial hazardous waste incineration, leveraging facility and collection synergies.

• Oil business, particularly Safety-Kleen Sustainable Solutions, is seen as undervalued and a drag on valuation despite its profitability.

• Used motor oil collection and recycling is expanding into higher-value Group III oil, supported by a partnership with Castrol.

• Environmental services segment is diversified into technical, industrial, field, and emergency services, with strong recurring revenue streams.

Financial performance and growth outlook

• Baseline EBITDA for the oil business is now $190–200 million, with expectations to grow through cost management, pricing, and product mix.

• Free cash flow conversion is strong at 45–50% before corporate overhead, with $75–80 million in free cash at the $190 million EBITDA level.

• Oil business represents about 15% of total revenues and is expected to become a smaller share as other segments grow faster.

• Environmental services organic growth is running at 6–7%, with high single-digit guidance for the year.

• Margin expansion is targeted through price/cost management, operating leverage, and internalizing more work to reduce subcontractor reliance.

Market dynamics and competitive positioning

• Recent industry transactions have occurred at 12–16x multiples, while current trading multiple is 12.5x, reflecting strong market positioning.

• High customer stickiness and switching costs in technical and industrial services due to embedded teams and specialty offerings.

• Utilization rates for billable labor are in the low 90s, with ongoing efforts to reduce turnover and subcontractor use.

• Recurring revenue is supported by thousands of small, repetitive service events, especially in field and emergency response.

• Significant share in energy and industrial cleaning markets, with opportunities for margin growth through specialty services.